2019 (8) TMI 1416 - HC - Income Tax

Enhancement of profit by enhancing sales value - AO disbelief sales of books and other study material sold at a discount/distributed free of cost even then then some were obtained on discount - HELD THAT - Since the assessee is working on a missionary spirit, he is required to sell the books/stationery free of cost to the needy students on the recommendations of Principal of each school and for which the list was given to the AO and along with that necessary confirmation from the Principal were filed during the course of assessment proceedings and which have not been doubted by AO. In the circumstances, the contention that there was no material is wrong. The AO disbelieved the material while the Commissioner and Tribunal believed the same. The view taken by the Commissioner and the Tribunal can not be said to be perverse or based on no evidence

Summary

Issues:
- Whether allowance should be given to the Assessee for books and study material obtained at a discount and distributed free of cost.

Analysis:
The judgment involves ten appeals related to the Income Tax Act, 1961, against the order of the Income Tax Appellate Tribunal, Amritsar Bench, for the Assessment Year 2011-2012. The primary issue is whether the Assessee, a proprietor of an enterprise supplying educational material, should be allowed an allowance for books obtained at a discount and distributed free of cost. The Assessee's business involved acquiring books for schools at discounted rates, leading to a dispute during scrutiny where the Assessing Officer alleged that the Assessee was selling books at the Maximum Retail Price (MRP) despite discounts received. The Assessing Officer held that the Assessee's charity activities were a subterfuge to reduce taxable income and assessed additional income. However, the Commissioner, Income Tax accepted the Assessee's claims regarding discounted/free book sales, granting relief by restricting the trading addition made by the Assessing Officer. The Appeals before the Tribunal resulted in further relief to the Assessee, leading to subsequent appeals and miscellaneous applications for modification.

The key contention raised was the lack of material supporting the conclusions of the Commissioner and the Tribunal. However, the judgments revealed that material was presented before the Assessing Officer, including details of discounted sales to needy students recommended by schools and evidence of supplying free books to teachers. The Assessing Officer's disbelief in the material was contradicted by the Commissioner and Tribunal, who found the evidence credible. The judgment emphasized that the view taken by the Commissioner and the Tribunal was not perverse and was based on substantial evidence. Consequently, the Appeals were dismissed, and any pending applications were disposed of. The judgment clarified that the Assessee's charity activities were legitimate and not a means to evade taxes, providing relief from the additional income assessed by the Assessing Officer.